Item 9A. Controls and Procedures
ITEM 9A – Controls and Procedures
Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer, have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of December 31, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective.
For purposes of Rule 13a-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act.
The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that:
(i) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
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Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, our Chief Executive Officer and Chief Financial Officer and Principal Accounting Officer concluded that our internal control over financial reporting was effective as of December 31, 2023.
Deloitte & Touche LLP, our independent registered public accounting firm, has audited the effectiveness of the Company's internal control over financial reporting as of December 31, 2023 and has issued a report which is included in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no significant changes in the Company's internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B – Other Information
On November 20, 2023 , Donal L. Mulligan , Board of Directors , adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 2,358 shares of the Company’s common stock until April 30, 2025.
ITEM 9C – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
ITEM 10 – Directors, Executive Officers and Corporate Governance
Information required under this item with respect to directors is contained in the section entitled “Board of Directors” as part of our 2024 Proxy Statement and is incorporated herein by reference. See also Item 1, Information About Our Executive Officers in Part I hereof.
Code of Conduct
We have adopted the Tennant Company Code of Conduct, which applies to all of our employees, directors, consultants, agents and anyone else acting on our behalf. The Code of Conduct includes particular provisions applicable to our senior financial management, which includes our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and other employees performing similar functions. A copy of our Code of Conduct is available on the Investor Relations website at investors.tennantco.com. We intend to post on our website any amendment to, or waiver from, a provision of our Code of Conduct that applies to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Chief Accounting Officer and other persons performing similar functions promptly following the date of such amendment or waiver. In addition, we have also posted copies of our Corporate Governance Principles and the Charters for our Audit, Compensation, Governance and Executive Committees on our website.
ITEM 11 – Executive Compensation
Information required under this item is contained in the sections entitled “Director Compensation," “Executive Compensation Information” and "Pay Ratio" as part of our 2024 Proxy Statement and is incorporated herein by reference.
ITEM 12 – Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Information required under this item is contained in the sections entitled “Security Ownership of Certain Beneficial Owners and Management” and "Equity Compensation Plan Information" as part of our 2024 Proxy Statement and is incorporated herein by reference.
ITEM 13 – Certain Relationships and Related Transactions, and Director Independence
Information required under this item is contained in the sections entitled “Director Independence” and “Related-Person Transaction Approval Policy” as part of our 2024 Proxy Statement and is incorporated herein by reference.
ITEM 14 – Principal Accountant Fees and Services
Information required under this item is contained in the section entitled “Fees Paid to Independent Registered Public Accounting Firm” as part of our 2024 Proxy Statement and is incorporated herein by reference.
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PART IV
ITEM 15 – Exhibits and Financial Statement Schedules
A. The following documents are filed as a part of this report:
1. Financial Statements
Consolidated financial statements and related notes, together with the reports of Deloitte & Touche LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 34 ), appear in Part II Item 8. Financial Statements and Supplementary Data of this Form 10-K.
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
(In millions) 2023 2022 2021
Allowance for doubtful accounts:
Balance at beginning of year $ 6.1 $ 5.3 $ 4.6
Charged to costs and expenses 4.4 1.9 1.5
Reclassification — — —
Charged to other accounts (a)
— 0.1 0.3
Deductions (b)
( 3.3 ) ( 1.2 ) ( 1.1 )
Balance at end of year $ 7.2 $ 6.1 $ 5.3
Sales returns reserve:
Balance at beginning of year $ 1.4 $ 1.0 $ 1.0
Charged to costs and expenses 2.0 0.9 0.1
Deductions (b)
( 1.5 ) ( 0.5 ) ( 0.1 )
Balance at end of year $ 1.9 $ 1.4 $ 1.0
Allowance for excess and obsolete inventories:
Balance at beginning of year $ 14.2 $ 14.3 $ 13.6
Charged to costs and expenses 8.9 0.5 1.7
Charged to other accounts (a)
0.1 0.2 ( 0.3 )
Deductions (c)
( 6.0 ) ( 0.8 ) ( 0.7 )
Balance at end of year $ 17.2 $ 14.2 $ 14.3
Valuation allowance for deferred tax assets:
Balance at beginning of year $ 3.3 $ 4.8 $ 7.5
Charged to costs and expenses ( 0.3 ) ( 1.4 ) ( 2.6 )
Charged to other accounts (a)
0.2 ( 0.1 ) ( 0.1 )
Balance at end of year $ 3.2 $ 3.3 $ 4.8
Warranty reserve:
Balance at beginning of year $ 10.9 $ 10.4 $ 11.1
Charged to costs and expenses 12.2 9.9 8.5
Charged to other accounts (a)
( 0.1 ) ( 0.1 ) ( 0.2 )
Deductions (d)
( 11.8 ) ( 9.3 ) ( 9.0 )
Balance at end of year $ 11.2 $ 10.9 $ 10.4
(a) Primarily includes impact from foreign currency fluctuations.
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(b) Includes accounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged against reserves.
(c) Includes inventory identified as excess, slow moving or obsolete and charged against reserves.
(d) Includes warranty claims charged against reserves.
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
3. Exhibits
Item # Description Method of Filing
3.1 Restated Articles of Incorporation
Incorporated by reference to Exhibit 3i to the Company’s Form 10-Q for the quarter ended June 30, 2006.
3.2 Amended and Restated By-Laws
Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated January 13, 2023.
3.3 Articles of Amendment of Restated Articles of Incorporation of Tennant Company
Incorporated by reference to Exhibit 3iii to the Company's Form 10-Q for the quarter ended March 31, 2018.
4.1 Description of Securities
Incorporated by reference to Exhibit 4.1 to the Company's Form 10-K for the year ended December 31, 2022.
10.1 Tennant Company Executive Nonqualified Deferred Compensation Plan, as restated effective January 1, 2009, as amended*
Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended September 30, 2012.
10.2 Form of Amended and Restated Management Agreement and Executive Employment Agreement*
Incorporated by reference to Exhibit 10.3 to the Company's Form 10-K for the year ended December 31, 2011.
10.3 Schedule of parties to Management and Executive Employment Agreement
Filed herewith electronically.
10.4 Tennant Company Non-Employee Director Stock Option Plan (as amended and restated effective May 6, 2004)*
Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended June 30, 2004.
10.5 Tennant Company Amended and Restated 1999 Stock Incentive Plan*
Incorporated by reference to Appendix A to the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders filed on March 15, 2006.
10.6 Tennant Company 2007 Stock Incentive Plan*
Incorporated by reference to Appendix A to the Company’s Proxy Statement for the 2007 Annual Meeting of Shareholders filed on March 15, 2007.
10.7 Amended and Restated 2010 Stock Incentive Plan, as Amended*
Incorporated by reference to Appendix A to the Company's Proxy Statement for the 2013 Annual Meeting of Shareholders filed on March 11, 2013.
10.8 2017 Stock Incentive Plan*
Incorporated by reference to Appendix A on the Company's Proxy Statement for the 2017 Annual Meeting of Shareholders filed March 15, 2017.
10.9 Form of Tennant Company 2017 Stock Incentive Plan Non-Statutory Stock Option Agreement*
Incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q for the quarter ended June 30, 2017.
10.10 Form of Tennant Company 2017 Stock Incentive Plan Restricted Stock Agreement*
Incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q for the quarter ended June 30, 2017.
10.11 Form of Tennant Company 2017 Stock Incentive Plan Non-Employee Director Restricted Stock Agreement*
Incorporated by reference to Exhibit 10.5 to the Company's Form 10-Q for the quarter ended June 30, 2017.
10.12 Form of Tennant Company 2017 Stock Incentive Plan Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.6 to the Company's Form 10-Q for the quarter ended June 30, 2017.
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10.13 Form of Tennant Company 2017 Stock Incentive Plan Non-Employee Director Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 2018.
10.14 Tennant Company Executive Officer Cash Incentive Plan*
Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 20, 2018.
10.15 Tennant Company Executive Officer Severance Plan and Summary Plan Description*
Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed October 10, 2018.
10.16 Tennant Company 2020 Stock Incentive Plan*
Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.17 Form of Tennant Company 2020 Stock Incentive Plan Non-Statutory Stock Option Agreement*
Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.18 Form of Tennant Company 2020 Stock Incentive Plan Restricted Stock Agreement*
Incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.19 Form of Tennant Company 2020 Stock Incentive Plan Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.20 Form of Tennant Company 2020 Stock Incentive Plan Non-Employee Director Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.7 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.21 Form of Tennant Company 2020 Stock Incentive Plan Performance Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.8 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.22 Form of Tennant Company 2020 Stock Incentive Plan Special Performance Restricted Stock Unit Agreement*
Incorporated by reference to Exhibit 10.9 to the Company’s Form 10-Q for the quarter ended June 30, 2020.
10.23 Amendment to Employment Agreement with David Huml*
Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2021.
10.24 Non-Statutory Stock Option Agreement (Inducement Grant), between Fay West and Tennant Company, dated May 7, 2021*
Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed on May 10, 2021.
10.25 Restricted Stock Agreement (Inducement Grant), between Fay West and Tennant Company, dated May 7, 2021*
Incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 filed on May 10, 2021.
10.26 Restricted Stock Unit Agreement (Performance Based Inducement Grant), between Fay West and Tennant Company, dated May 7, 2021*
Incorporated by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 filed on May 10, 2021.
10.27 Restricted Stock Unit Agreement (Inducement Grant), between Fay West and Tennant Company, dated May 7, 2021*
Incorporated by reference to Exhibit 99.4 to the Company’s Registration Statement on Form S-8 filed on May 10, 2021.
10.28 Credit Agreement, dated April 5, 2021
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 7, 2021.
10.29 Offer Letter with Fay West commencing April 15, 2021*
Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended June 30, 2021.
10.30 Amendment No. 1 to Credit Agreement, dated as of November 10, 2022
Incorporated by reference to Exhibit 10.01 to the Company's Current Report on Form 8-K filed on November 17, 2022.
21 Subsidiaries of the Registrant
Filed herewith electronically.
23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm
Filed herewith electronically.
24.1 Powers of Attorney Included on signature page.
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31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
Filed herewith electronically.
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Filed herewith electronically.
32.1 Section 1350 Certification of Chief Executive Officer
Filed herewith electronically.
32.2 Section 1350 Certification of Chief Financial Officer
Filed herewith electronically.
97 Compensation Recoupment Policy
Filed herewith electronically.
101 The following financial information from Tennant Company’s annual report on Form 10-K for the period ended December 31, 2023, filed with the SEC on February 22, 2024, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021, (ii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022, and 2021, (iii) the Consolidated Balance Sheets as of December 31, 2023 and 2022, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021, (v) the Consolidated Statements of Equity for the years ended December 31, 2023, 2022, and 2021, and (vi) Notes to the Consolidated Financial Statements. Filed herewith electronically.
104 Inline Extensible Business Reporting language (iXBRL) for the cover page of this Annual Report on Form 10-K, included in Exhibit 101 Filed herewith electronically.
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual report on Form 10-K.
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ITEM 16 – Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TENNANT COMPANY
By /s/ David W. Huml
David W. Huml
President, CEO and
Board of Directors
Date February 22, 2024
Each of the undersigned hereby appoints David W. Huml and Kristin A. Erickson, and each of them (with full power to act alone), as attorneys and agents for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, any and all amendments and exhibits to this annual report on Form 10-K and any and all applications, instruments, and other documents to be filed with the Securities and Exchange Commission pertaining to this annual report on Form 10-K or any amendments thereto, with full power and authority to do and perform any and all acts and things whatsoever requisite and necessary or desirable.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By /s/ David W. Huml By /s/ Timothy R. Morse
David W. Huml Timothy R. Morse
President, CEO and Board of Directors Board of Directors
Date February 22, 2024 Date February 22, 2024
By /s/ Fay West By /s/ Donal L. Mulligan
Fay West Donal L. Mulligan
Chief Financial Officer and Principal Accounting Officer Board of Directors
Date February 22, 2024 Date February 22, 2024
By /s/ Azita Arvani By /s/ Steven A. Sonnenberg
Azita Arvani Steven A. Sonnenberg
Board of Directors Board of Directors
Date February 22, 2024 Date February 22, 2024
By /s/ Andrew P. Hider By /s/ Maria C. Green
Andrew P. Hider Maria C. Green
Board of Directors Board of Directors
Date February 22, 2024 Date February 22, 2024
By /s/ Carol S. Eicher By /s/ David Windley
Carol S. Eicher David Windley
Board of Directors Board of Directors
Date February 22, 2024 Date February 22, 2024
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HIDDEN IXBRL
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